After operating his own ghost kitchen, Keto Kitchen, in Austin for the past year, serial entrepreneur John Meyer saw that fintech resources for the industry were lacking.
When Keto Kitchen had good sales in the first quarter, Meyer went to the bank to ask for expansion financing and recalled the banker asking him what a ghost kitchen was. That told him there was an opportunity for a data-driven financing tool for these types of restaurants.
“Even if bankers did know about it they didn’t have technology to properly underwrite them,” he added. So instead, Meyer, founder and CEO, created Ghost Financial to initially do two things: provide what he touts as “the first cash-back credit card for food and beverage inventory” and use data and technology to underwrite restaurant expansion loans and credit limits for the card.
The credit card offers 1% cash back on purchases, which can be pretty lucrative, especially if ghost kitchens spend, on average, about $40,000 a month for inventory from their suppliers, he added.
Ghost Financial is also developing API integrations with point-of-sale systems, like Toast, and delivery apps, like DoorDash, so it can pull metrics that represent areas including operational health and efficiency, hourly and daily sales, average food preparation ties, ratings and reviews to determine credit limit and provide an instant loan decision.
If you’re wondering where you’ve heard Meyer’s name, you may remember him from 2015 when he was building Fresco News, a crowdsourced network for breaking news, or as co-founder of Homebound, where he is still an advisor.
Meyer was candid about his journey starting Homebound with Jack Abraham. This happened to be around the time he lost his father to depression, and Meyer decided to take some time off to focus on healing, and about a year-and-a-half ago, he started a number of side passion projects, including angel investing, advising and starting Keto Kitchen.
“I went from a seasoned tech entrepreneur to working 12 hours a day in the kitchen with chefs and dishwashers,” he said. “That dive into the service industry taught me a lot. Restaurants have small profit margins, maybe 5% or less. There are extremely hard workers, and it turns out, a vast majority of the industry, especially ghost kitchens, are paying for inventory with a check, cash or ACH and not benefiting financially from a five- or six-figure per month expense.”
Meyer cited research showing that by 2030, ghost kitchens will be a $1 trillion industry. So to get in front of the demand and further develop Ghost Financial’s first two core products, the company took in a $2.5 million pre-seed round to build engineering and marketing teams.
He secured a diverse mix of investors, including HOF Capital, 305 Ventures, Hustle Fund, Active Capital, Anthony Ghosn, The Council, Amber Illig, Sarah Kaney, Meg Fitzpatrick, Samantha Stein, Sabrina Halper, Kosinski Ventures, House Capital, Starship Ventures, Ben Yu, Adam Guild, Cory Levy, Ditec Ventures, Draft Ventures, Pareto20 and Kepler Operator Fund.
“I am a big believer in funding for bringing in strategic expertise and additional capabilities so that we can move quicker,” Meyer said. “This is an obvious concept that I am surprised was not built before.”
He says there are a few competitors out there that are still in stealth mode, but Ghost Financial’s secret sauce is its empathy-first approach that cares about operators rather than asking them to spend 30% of their revenue on tools. Instead, his company makes money through the credit card interchange fees, pulling in around 2% in fees, of which half goes back to the operator in the form of the cash back.
Others are also seeing pent-up demand in this area and are providing some interesting offerings. For example:
- Melon Kitchens is an Indianapolis-based delivery-only restaurant accelerator for Black chefs that includes a three-month program to guide emerging food entrepreneurs from idea to test kitchen to revenue generation. The project is backed by Kelli Jones of Sixty8 Capital.
- MayaEats’ One Stop Kitchen functions as a partner with underperforming restaurants to renovate their physical stores, digitize them and convert them into fast-casual restaurants and fulfillment centers.
- Last year, Inspire Brands launched Alliance Kitchen in Atlanta, touted as “the first ghost kitchen operated by a multi-brand restaurant” that includes Arby’s, Buffalo Wild Wings, Jimmy John’s, SONIC Drive-In and Rusty Taco.
We’ve also seen other tools for ghost kitchens receive funding. For example: CloudKitchens, Travis Kalanick’s ghost kitchen startup, raised $850 million at a $15 billion valuation in January. And All Day Kitchens, which raised $65 million in Series C funding for its approach to enabling restaurants to share their food across a city using satellite kitchens. We also saw Popchew, Lunchbox, Forward Kitchens, Muy, JustKitchen and robotic kitchens like YPC raise funds in the past year.
Meanwhile, Meyer expects to launch the tools later this year with some $27 million in committed minimum spending, which he says is likely to triple and quadruple as it rolls out the credit card.
Up next, the company’s third product will focus on restaurant insurance — one of the biggest pain points — and the fourth one will be on an optimized payroll system. All of which will put Ghost Financial in position as a one-stop shop for the finance and business needs of ghost kitchens and restaurants.